In literal terms, yes, in effect, debateable. In the hypothetical absence of the sales tax Apple might be able to charge more, and in that case the presence of the tax means Apple earns less profit, ergo the same effect.

But I digress, perhaps a simple rewording is in order to make the original point clearer...

The sale of Apple's products contributes to government revenues in the form of sales tax. There is no suspicion that Apple are in any way avoiding or hindering the collection of sales tax.

In literal terms, yes, in effect, debateable. In the hypothetical absence of the sales tax Apple might be able to charge more, and in that case the presence of the tax means Apple earns less profit, ergo the same effect.

But I digress, perhaps a simple rewording is in order to make the original point clearer...

The sale of Apple's products contributes to government revenues in the form of sales tax. There is no suspicion that Apple are in any way avoiding or hindering the collection of sales tax.

Except that the liability has been transferred to a subsidiary in Ireland, which doesn't pay any tax because of a disconnect. Are Apple based in Ireland? Or have they avoided that tax liability?

Apple Australia merely operates the stores. It's not the headquarters. Apple Australia buys iPads at wholesale price from Ireland ( or the US) and the sells it on and whatever profits it makes from those stores it pays taxes on. It's in the same position as any retailer.

Prior to apple owning its own stores this wouldn't have been an issue. Then Apple sold to external retailers at wholesale price and booked at the wholesalers HQ. which is probably what BMW do. Apple didn't need subsidiaries in all countries.

Of course even acknowledging that the piece is ridiculous, it's taking the margin per iPad, which is revenue not profit on the retail price and ignoring the vast majority of iPad sales which are sold to channel at wholesale. it then assumes this fictional marginal profit is owed where items are sold, not where they come from.Edited by asdasd - 3/7/14 at 11:30am

Of course it is. Because all retailers operate at close to zero margin, right? Because all retailers buy 99% of their product from another company with the same owners, right? Because Apple Ireland make all of the iPads, right? Because all wholesalers exploit loopholes in Irish corporate law, right?

Apple transfer the bulk of their non-US profits to Apple Ireland (the actual companies are Apple Sales International and Apple Distribution International, I believe), where they pay barely any tax on them. The argument that Apple don't owe any other country any tax because they aren't based in that country is technically correct, but a conceptual dud, because Apple clearly aren't based in Ireland. They're exploiting loopholes in the international tax system that arise because there is no commitment to either unitary taxation, or country-by-country reporting and accountability, or both.

Of course it is. Because all retailers operate at close to zero margin, right? Because all retailers buy 99% of their product from another company with the same owners, right? Because Apple Ireland make all of the iPads, right? Because all wholesalers exploit loopholes in Irish corporate law, right?

Apple transfer the bulk of their non-US profits to Apple Ireland (the actual companies are Apple Sales International and Apple Distribution International, I believe), where they pay barely any tax on them. The argument that Apple don't owe any other country any tax because they aren't based in that country is technically correct, but a conceptual dud, because Apple clearly aren't based in Ireland. They're exploiting loopholes in the international tax system that arise because there is no commitment to either unitary taxation, or country-by-country reporting and accountability, or both.

They are exploiting Irish and American law but they don't owe corporation tax in Australia or the UK.

I have no idea what your first paragraph even means. So I'll start with a simple question.

When a BMW car is sold in Australia but imported from Dusseldorf where is corporation tax paid?

BTW Apple clearly are based in Ireland and have been since 1980. They employ a few thousand. As to what they do I'll explain more when you answer the BMW question.

When a BMW car is sold in Australia but imported from Dusseldorf where is corporation tax paid?

Depends on the corporate arrangement of course. Assuming that BMW Germany is the main company and manufacturer, incorporated in Germany, and BMW Australia is a subsidiary selling the cars, and incorporated in Australia, then corporation tax is paid in both, on their respective profits.

And that's fine.

What's not fine is BMW Ireland wading in, buying the cars at cost from BMW Germany, then selling them at near retail price to BMW Australia, thereby transferring all of the value added (and hence, profit) to Ireland.

Quote:

Originally Posted by asdasd

BTW Apple clearly are based in Ireland and have been since 1980. They employ a few thousand. As to what they do I'll explain more when you answer the BMW question.

Apple are not based in Ireland. They are based in the USA. They have some subsidiaries in Ireland, but that is not the same thing.

Depends on the corporate arrangement of course. Assuming that BMW Germany is the main company and manufacturer, incorporated in Germany, and BMW Australia is a subsidiary selling the cars, and incorporated in Australia, then corporation tax is paid in both, on their respective profits.

And that's fine.

What's not fine is BMW Ireland wading in, buying the cars at cost from BMW Germany, then selling them at near retail price to BMW Australia, thereby transferring all of the value added (and hence, profit) to Ireland.

Apple are not based in Ireland. They are based in the USA. They have some subsidiaries in Ireland, but that is not the same thing.

You didn't really answer the question. The answer is corporation tax is paid where BMW is based, or headquartered. Note that BMW can outsource production but own the IP.

In Apples case there are two companies with the IP. Apple in the US and Apple in Cork. One is where manufacturing for the Americas used to happen ( but is now out sourced ) the other is where worldwide manufacturing used to happen ( but is now outsourced). Neither company is buying built iPads from other Apple companies, they get them from FoxConn. But Foxconn merely assembles the iPads and most of the components and the OS are Apple's property. The difference between the cost of the iPad to Apple and it's wholesale price from Apple - the value added - is down to the IP. And a reasonable discussion can be had about how IP is transfered, and whether tax should be where IP is actually produced, but none of this would mean that Australia is owed corporation tax for iPad sales.

Yet Apple Sales International, headquartered in Ireland, claims they don't have tax residency there and owes no tax to them. In fact they claim don't need to pay tax on their profits to anyone. They have been "stateless" for tax purposes since 2009, five years now. Still OK with it?

And yes, they're not the only big company avoiding tax obligations. Google, Facebook, and lots of non-techs have their own schemes, tho I haven't heard of any others that claim not to answer to anyone's taxing authorities.

Depends on the corporate arrangement of course. Assuming that BMW Germany is the main company and manufacturer, incorporated in Germany, and BMW Australia is a subsidiary selling the cars, and incorporated in Australia, then corporation tax is paid in both, on their respective profits.

I clearly did answer the question, thanks.

Quote:

Originally Posted by asdasd

Neither company is buying built iPads from other Apple companies, they get them from FoxConn. But Foxconn merely assembles the iPads and most of the components and the OS are Apple's property.

So your BMW example was a bit rubbish then?

Quote:

Originally Posted by asdasd

The answer is corporation tax is paid where BMW is based, or headquartered.

In Apple's case that is the USA. The Irish companies are subsidiaries.

Yet Apple Sales International, headquartered in Ireland, claims they don't have tax residency there and owes no tax to them. In fact they claim don't need to pay tax on their profits to anyone. They are "stateless" for tax purposes. Still OK with it?

Seriously. I said I wasn't ok with it. Apple should pay that tax in Ireland or repatriate it to the US. Those are the only two countries with claims. All I am doing here is explaining corporation tax 101.

In Apple's case that is the USA. The Irish companies are subsidiaries.

I really can't make this simpler. But I'll try.

1) BMW manufactures in Dusseldorf and sells to Australia. Corporation tax paid in Germany.
2) BMW Germany outsources to a different company in China to build, ships to Dusseldorf and resells to Australia. Corporation tax paid in Germany.
3) BMW sets up a subsidiary to manufacture in Indonesia. Indonesia builds and sells to Australia . Corporation tax paid in Indonesia and , if repatriated, in Germany ( minus any tax paid in Indonesia).
4) BMW sets up a subsidiary to manufacture in Indonesia. Indonesia outsources the build to a non BMW company (which is merely an expense) and sells finished product to Australia . Corporation tax paid in Indonesia and, if repatriated, in Germany ( minus any tax paid in Indonesia).

Note that to set up a subsidiary which can manufacture or outsource your production for you you need to transfer the IP.

Note that in all four cases Australia is not owed corporation tax.

This isn't transfer pricing. In no case here is the importing country owed corporation tax.

Corporation tax 101.

Apple should pay its taxes in Ireland or repatriate to the us. But that's all.Edited by asdasd - 3/7/14 at 12:14pm

Seriously. I said I wasn't ok with it. Apple should pay that tax in Ireland or repatriate it to the US. Those are the only two countries with claims. All I am doing here is explaining corporation tax 101.

Ah, good then. I thought you were arguing that you didn't believe Apple to be doing anything wrong in your view. I've misunderstood your position. You think they're wrong not to be paying tax to the Irish on their $40B+ in realized profits.

Ah, good then. I thought you were arguing that you didn't believe Apple to be doing anything wrong in your view. I've misunderstood your position. You think they're wrong not to be paying tax to the Irish on their $40B+ in realized profits.

Legally yes. Morally I think that companies should be able to transfer IP but taxes should be paid where the IP is actually produced. So Apple should pay on the US. Hard to enforce that.

This isn't transfer pricing. In no case here is the importing country owed corporation tax.

Corporation tax 101.

Well that's obviously not true since Apple Australia have paid $193 million in corporation tax in the past ten years. Because Apple Australia is a company based in Australia that logs profits.

And since the parent company should logically be Apple USA, the spirit of tax law would expect Apple USA to be logging the value add profits from manufacturing and realising the IP. But they don't, ASI in Ireland does, because the value add was transferred out of the expected arrangement and into this holding company in a tax haven, with an ephemeral tax status.

I think we're broadly in agreement, except for these weird "Apple Australia owes nothing" and "no profits have been transferred" hang ups that you have.

You seem quite happy to be covering a tiny bit of what Apple and other wealthy entities would (should) have paid in taxes with your own personal hard-earned money. No doubt they appreciate it. I'm not as pleased when April inevitably rolls around each year and the rich get even richer.

Some things you can change, others you can't that's why poor saps like myself have no say in the matter.

Yes it would be nice if I can negotiate with my employer to pay an offshore entity my wages as a contractor.

Yes it would be nice if I worked for that offshore entity for a fraction of the contract with my employer.

Yes it would be nice to own that overseas entity in a country like Liechtenstein where the ATO has no jurisdiction to find out who the owner is.

Yes it would be nice to transfer my real pay as a series of loans and to pay rent to the overseas entity for the house they own.

Unfortunately I just don't have the type of money that allows the setting up of such schemes.

Like most of the suckers who are left footing the bill.

btw our financial year ends June 30.

Edited by hill60 - 3/7/14 at 2:13pm

Better than my Bose, better than my Skullcandy's, listening to Mozart through my LeBron James limited edition PowerBeats by Dre is almost as good as my Sennheisers.

The US drug prices are the result of the supposed free market utopia. They aren't cheaper because they monopolise the supply.

I don't think the US has a free market in health care, if you want to see how a free market works you have to look at consumer electronics or food.

I personally think private hospitals give better care than public hospitals and private schools give better education that public schools. But I am not a Libertarian, I don't think the public hospitals/schools should be closed, I think we are too early in history for that, in the sense that people's incomes grow over time.

I think the government should focus on policies that favour the growth of the middle class, and then the middle class themselves will automatically buy private services as soon as they can afford them, because they will want the best for their family in terms of medical and education services. In the mean time, the public services should remain.

For example in Australia we have public hospitals and schools, but 33% of people send their kids to private high school and 55% of people have a private health insurance policy, just because they have reached middle class and can afford it. This is good for the government too because when people take care of themselves, it leaves more money for the truly needy. My preference is that over time, as more people join the middle class, the need for public services will slowly fade away (not to nothing, but to some minimum baseline), rather than be legislated away by a Libertarian politician.

I am willing to bet that Apple have acted legally in all countries & jurisdictions regarding their tax obligations.

Tax law is extremely & unnecessarily complex - here is a link (http://www.ato.gov.au) to Australia's taxation office (for those who could be bothered trying to wade through thousands of pages of Policy & legal precedent discussions).

The headline of the article might have asked "Is it morally OK for companies or individuals to legally avoid paying a fair share of tax." Then the article would need to define what a fair share is.

Lots of people dream of revolutionising the tax system around the world. Lots of other people dream about having enough clean water or food to survive the next day. These two dreams are probably related somewhere along the line.

This isn't transfer pricing. In no case here is the importing country owed corporation tax.

Corporation tax 101.

Apple should pay its taxes in Ireland or repatriate to the us. But that's all.

It wouldn't be transfer pricing if they weren't reselling the goods between different incorporated companies but they are. They have no other reason to resell goods internally at a markup once they pay the manufacturing costs in China. If the Australian company wasn't due to pay income tax, they wouldn't pay any but they do pay some income tax. Apple is even hiring a Tax Manager to specifically handle transfer pricing:

If payments were made directly to Ireland, they would be due income tax in Ireland. This is what they do with iTunes, which is registered in Luxembourg. No matter where you are in Europe, the iTunes receipts are to Luxembourg.

I would guess that the sale of physical goods by billing direct from Ireland would incur extra costs, potentially they wouldn't be able to hold stock in Australia, which is where the requirement for physical offices and transfer pricing comes in.

Quote:

Originally Posted by ascii
I don't think the US has a free market in health care, if you want to see how a free market works you have to look at consumer electronics or food.

There is no part of free market trading that prevents a monopoly on the supply of goods. Just look at Comcast/Time Warner Cable. You can't say it's not the free market just because it fails. Food and consumer electronics have enough diversity that there's enough competition. This isn't the case with everything. If someone takes control or ownership of a supply of a limited resource like drugs or oil then there is no possibility for competition and that's when people run to the government to break up the monopoly. If there's a lot of competition, profits are driven down to unsustainable levels and it prevents new competitors. This is what happened with ebooks. Competitors in the free market never try to encourage competition, they try everything they can to prevent it with patents/trademarks/copyrights, buying up smaller rivals, undercutting prices and so on. If this was completely unregulated, we'd end up with a handful of companies controlling everything.

Competition led to the creation of the iPhone, personal computers and so many of the modern conveniences you regularly rely on. I often wonder if you take the position you've staked out just to avoid boredom, because it makes no sense to me.

Competition led to the creation of the iPhone, personal computers and so many of the modern conveniences you regularly rely on. I often wonder if you take the position you've staked out just to avoid boredom, because it makes no sense to me.

And government research, support, and regulation led or contributed to the creation of the internet, the telephone network, the electricity grid, and the business and skills environment and standardisations that the iPhone, personal computers and so many modern conveniences rely on.

Both are important, and both are problematic when they are unmoderated.

I'm not the arbiter of moderation, and don't have a fully-formed book o' policy handy.

Off the top of my head, you do want an authority to police/prevent illegal cyber activity, including but not limited to: illegal money transfers, sale of illegal goods, spreading of illegal media (child pornography etc).

Other things you might want them to do: enforce net neutrality, educate children on use of the internet.

And government research, support, and regulation led or contributed to the creation of the internet, the telephone network, the electricity grid, and the business and skills environment and standardisations that the iPhone, personal computers and so many modern conveniences rely on.

Both are important, and both are problematic when they are unmoderated.

Enforcing net neutrality and education efforts are not moderation activities. As to the rest: you have entered slippery slope territory and the slope is very slick.

Competition led to the creation of the iPhone, personal computers and so many of the modern conveniences you regularly rely on. I often wonder if you take the position you've staked out just to avoid boredom, because it makes no sense to me.

I notice you didn't comment on how the free market can't prevent anti-competitive monopolies. I have nothing against the free market in its entirety, my objection is to it being applied to everything under the assumption that it's a perfect system. Ignoring instances when it fails doesn't make those failures go away.

If you had a completely unregulated market then as soon as the iPhone came out, Apple's competition would have cloned it, like this:

and they'd have been able to sell it side by side in stores with the original at a fraction of the price. As soon as you introduce any form of regulation then the results are not solely defined by competition. It's competition within a set of necessary boundaries for fair competition.

These regulations for fair competition include the tax rates. They can't be zero and they can't be fixed value. They have to be setup to promote growth in order to prevent anti-competitive/monopolistic scenarios. If a big company can get away with paying low single digit taxation, it's harder for a new company to compete in the same market. If the normal rate of profit increase was the same for both but one pays 1/5th of the tax rate, the bigger company's profits would grow faster year on year as they'd have more capital to reinvest.

This is the same issue you see with income differences between the wealthy and poor. The wealthy have no reason to be in debt, can reinvest income and they lower their tax rates too so their assets grow faster. This is a danger to liberty because it puts too much power into the hands of too few people. Just look at Samsung's level of control in Korea: